Fujian Yuanxiang New MaterialsLtd (SZSE:301300) Is Due To Pay A Dividend Of CN¥0.40

Fujian Yuanxiang New Materials Co.,Ltd (SZSE:301300) will pay a dividend of CN¥0.40 on the 5th of June. This means the annual payment will be 1.7% of the current stock price, which is lower than the industry average.

See our latest analysis for Fujian Yuanxiang New MaterialsLtd

Fujian Yuanxiang New MaterialsLtd's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last dividend, Fujian Yuanxiang New MaterialsLtd is earning enough to cover the payment, but then it makes up 112% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to fall by 10.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 90%, which is definitely on the higher side.

Fujian Yuanxiang New MaterialsLtd Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. There hasn't been much of a change in the dividend over the last 2 years. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Fujian Yuanxiang New MaterialsLtd's EPS has declined at around 11% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fujian Yuanxiang New MaterialsLtd's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Fujian Yuanxiang New MaterialsLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.